 Insider trading in loss firmsJagadison K. Aier Advances in accounting, 2013, vol. 29, issue 1, 12-26 Abstract: This study investigates whether insiders in loss firms trade their company stock differentially around new loss and loss reversal earnings announcements. Research suggests that the likelihood of litigation influences managers' stock trading decisions prior to material events. I hypothesize and find that insiders reduce their net stock sales in a monotonic manner before a new loss announcement presumably to avoid improper trading allegations before bad news. This decrease is more pronounced if the new loss is the start of a multiple loss sequence. In contrast, there is no significant change in net trading patterns in the quarters prior to a loss reversal announcement irrespective of whether the loss reversal is the start of a single profit or multiple profit sequence indicating that insiders seem less concerned about legal implications when trading before good news. The results suggest that insiders in loss firms perceive asymmetric litigation risks to trading stock in the quarters before bad news relative to good news and act accordingly. Keywords: Insider trading; Loss firms; Earnings announcements; Asymmetric litigation risk (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:advacc:v:29:y:2013:i:1:p:12-26 DOI: 10.1016/j.adiac.2012.12.002 Access Statistics for this article Advances in accounting is currently edited by Dennis Caplan More articles in Advances in accounting from Elsevier |
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